1Q2015 GMPS Results Business Plan update

Transcription

1 1Q2015 GMPS Results Business Plan update Fabrizio Viola CEO & General Manager Bernardo Mingrone Deputy General Manager, Head of Finance & Operations 11 th May 2015

2 Executive Summary 1Q15 Results Highlights Net profit for the period (EUR 72.6mln) and Pre-provision profit at EUR 614mln, up 63.7% QoQ NII slightly up (+0.2%) vs. 4Q14 and strong performance from fees (+9.3% QoQ), driven by WM component (+26.5% QoQ) Commercial Loans stable QoQ, following strong deleveraging in previous quarters Direct funding up 4.2% QoQ, mainly thanks to commercial components, and Indirect funding increase 4.7% QoQ Ongoing reduction of ECB exposure, with full repayment of LTRO Updated guidance of Business Plan targets Well on track in the implementation of Restructuring Plan initiatives Main strategic actions confirmed, with strong focus on productivity and asset quality New regulatory environment (AQR, SREP) and new macroeconomic conditions set targets to be achieved in 2018 Capital CET1 ratio * as at Mar-15 ** at 10.9%; 12% in 2018E, always above the 10.2% requested SREP level EUR 3bn rights issue completion expected by end of 2Q15 Full reimbursement of the remaining EUR 1.1bn of NFIs ahead of schedule, originally by 2017 * Basel 3 transitional ratio, pro-forma including EUR 3bn capital increase, the payment of NFIs coupon through the issue of new shares and the repayment of the remaining EUR 1,1bn NFIs ** CET1 ratio has been calculated capitalizing 1Q15 net income; consider that the effective computability of interim net income in regulatory capital is subject to ECB specific authorization (Art. 26 Regulation EU No 575/2013), for which GMPS has already submitted official request page 2

3 1Q15 Results page 3

4 1Q15 Results 1Q15 Results - Key messages 1Q15 Results - Balance sheet 1Q15 Results - P&L page 4

5 of which Ongoing positive trend in the core banking business Net Interest Income ( /mln) Deleverage of assets offset by cost of funding reduction and reimbursement of NFIs Net Fees ( /mln) +4.4% WM Fees +17.7% Increase in placements and growth from insurance % Q quarterly avg 1Q15 Cost related to NFI (coupon and price adjustment) 4Q quarterly avg 1Q15 4Q quarterly avg 1Q15 Operating Costs ( /mln) -5.1% Headcount reduction and cost containment actions Pre Provision Profit ( /mln) +66.2% Q quarterly avg 1Q15 4Q quarterly avg 1Q15 page 5

6 Funding optimization, with increase in commercial components Retail and Corporate Loans * ( /bn) 111,0 flat 102,0 101,6 Stabilization of Corporate lending Direct Funding ( /bn) 128,9 126,2 +5.3bn Strong increase in Time Deposits 131,5 Mar-14 Dec-14 Mar-15 Mar-14 Dec-14 Mar-15 Loan/Deposit ratio (%) Close to medium term target (96) Net Interbanking exposure ( /bn) Full LTRO reimbursement New TLTRO of EUR 6bn 103,0-120bps 30,8 94,8 93,6 19,9-5.3bn 14,7 Mar-14 Dec-14 Mar-15 Mar-14 Dec-14 Mar-15 *Loans excluding net NPLs page 6

7 New approach to NPE management in a more stringent environment AQR driven provisions and reclassifications: updated methodologies and parameters applied from the end of 2014 for classification and evaluation of credit exposures Non Perfoming Exposure coverage (%) Credit Department reorganization fully operational: additional expertise in Portfolio Managers, Asset Managers and Real Estate through new hires ,9 49,0 creation of a dedicated unit for the management of Non Performing Exposures use of specialised vehicles to participate in bankrupty auctions to protect value of loans subject to legal proceeding Mar-14 Dec-14 Mar-15 Cost of Risk (bps) Cost of risk improving slightly Improved coverage of non performing exposures, from 41.6% as at Mar-14 to 49% as at Mar-15 Further improvements are expected within the time horizon of the current plan depending on macroeconomic assumptions 155 Dec-14 Net of AQR driven provisions 152 Mar-15 (annualized) page 7

8 Capital ratios and capital increase CET 1 ratio 10,9% 10,2% 12,0% SREP Requirement: 10.2% transitional Always compliant with SREP threshold during Plan period Mar-15 transitional pro-forma* Mar-15 fully loaded pro-forma** 2018E The roadmap of capital increase Size: EUR 3.0bn right issue, fully underwritten Timing: expected during 2Q15, within the Comprehensive Assessment deadline for remedial actions (9 months from 26 October 2014) Early full reimbursement of the remaining EUR 1.1bn of NFIs * CET1 ratio calculated capitalizing 1Q15 net income; inclusion of interim net income in regulatory capital is subject to ECB specific authorization (Art. 26 Regulation EU No 575/2013), for which GMPS has already submitted an official request. **Basel 3 ratio pro-forma including EUR 3bn capital increase, the payment of NFIs 2014 coupon through the issue of new shares and the rapayment of the remaining EUR 1.1bn NFIs page 8

9 1Q15 Results 1Q15 Results - Key messages 1Q15 Results - Balance sheet 1Q15 Results - P&L page 9

10 Assets & Liabilities trends Total Assets /mln Mar-14 Dec-14 Mar-15 QoQ% YoY% Customer loans 132, , , % -7.2% Loans to banks 10,204 7,723 7, % -23.0% Financial assets 43,500 39,776 41, % -5.2% PPE and intangible assets 4,004 3,229 3, % -21.6% Other assets * 10,637 13,040 12, % 14.3% Total Assets 201, , , % -6.7% Total Liabilities /mln Mar-14 Dec-14 Mar-15 QoQ% YoY% Deposits from customers and securities issued 128, , , % 2.1% Deposits from banks 40,991 27,648 22, % -45.1% Other liabilities ** 24,888 23,583 27, % 8.5% Group equity 6,251 5,965 6, % 3.5% Minority interests % -28.3% Total Liabilities 201, , , % -6.7% Deleveraging is slowing thanks to improving macroeconomic conditions Financial assets up in relation to MPS Capital Services activity as primary broker Increase in funding, both direct and indirect components Net Interbank position improved (+EUR 5.3bn QoQ) thanks to the reduction of ECB exposure (LTROs reimbursement completed) Shareholders' equity up thanks to improvement in valuation reserves and profit for the period *Cash and cash equivalents, equity investments, DTAs and other assets ** Financial liabilities held for trading, provision for specific use, other liabilities page 10

11 Lending and Funding Total Lending /mln Mar-14 Dec-14 Mar-15 QoQ% YoY% Current accounts 11,404 8,745 8, % -25.6% Mortgages 62,966 55,328 55, % -12.6% Other forms of lending 29,474 27,276 27, % -7.7% Reverse repurchase agreements 5,457 4,142 7, % 40.5% Loans represented by securities 1,453 1, % -33.8% Impaired loans 21,925 23,143 23, % 8.4% Total 132, , , % -7.2% Direct funding Commercial Customer loans stable QoQ, with Retail lending (-1.1% QoQ) impacted by the planned run-off of Consum.it and slight improvement in Corporate lending (+0.5% QoQ). Total loans up 2.9% QoQ due to increase in repos with institutional counterparties, on which temporary surpluses of liquidity have been allocated Direct funding up 4.2% QoQ driven by time deposits (+17.2%) and recovery in bonds (+4.1%) thanks to the Consum.it securitization. Corporate funding increase vs. 4Q14 (+13.3% QoQ) thanks to sight deposits; Retail funding stable at EUR 61bn (+0.3% QoQ) Assets under custody up 2.3% affected by a positive market effect partially offset by a shift towards other forms of Wealth Management Wealth Management increased 7.3% QoQ: Mutual funds increased 11%, thanks to positive inflows and market impact; Life insurance increased 3.6% driven by Unit Linked products Wealth Management/Asset under Custody /mln Mar-14 Dec-14 Mar-15 QoQ% YoY% Current accounts 56,912 53,373 54, % -4.6% Time deposits 8,709 10,800 12, % 45.3% Repos 13,749 21,158 21, % 53.2% Bonds 38,022 31,406 32, % -14.0% Other types of direct funding * 11,466 9,487 10, % -6.0% Total 128, , , % 2.1% /mln Mar-14 Dec-14 Mar-15 QoQ% YoY% Assets under custody Wealth Management 58,617 54,622 55, % -4.7% 46,656 51,519 55, % 18.5% Total 105, , , % 5.6% * As at Mar-15, the item includes EUR 1,376bn in NFIs, including accrued, unpaid interest page 11

12 Asset Quality Net Non Performing Exposures (NPE) * Net Inflow of Gross NPE Doubtful loans (sofferenze) ( mln) Net QoQ (%) YoY (%) 8, Sale of NPLs portfolio 3, ,4 Application of new post AQR credit policies and triggers Unlikely to Pay 12, NP past due / overdue exposures 2, , ,5 1,3 Total NPE 23, Q14 2Q14 3Q14 4Q14 1Q15 30% of new net NPE inflows relating to one position vs. a local authority Non Performing Exposures Coverage Doubtful loans Recovery Inflows ( /mln) ( mln) Mar-14 Dec-14 Mar-15 Sale of NPLs portfolio 176 Doubtful loans (sofferenze) 58.5% 65.3% 65.5% 128 Unlikely to Pay 23.4% 32.3% 31.6% NP past due / overdue exposures 7.2% 19.6% 18.1% Total NPE 41.6% 48.9% 49.0% 1Q14 2Q14 3Q14 4Q14 1Q15 *Refer to seventh revision of July 30, 2008 to Bank of Italy circular 272/2008 Matrice dei conti issued by Bank of Italy on January 20, 2015 page 12

13 of which Financial assets: focus on Italian Govies portfolio HFT; 16,3% Breakdown by IAS category L&R; 0,6% Italian Government Bonds: EUR 25bn * AFS; 83,0% Breakdown by maturity 49,3% 17,9% 18,0% 8,9% 5,9% >2030 Securities and Derivatives Portfolio at EUR 33.8bn in Mar-15, increased 1.6% QoQ, mainly in HFT component (+EUR 2bn) driven by MPS Capital Services Nominal Value of the Italian Government Bond Portfolio in AFS: EUR 16.7bn vs. EUR 18.7bn in Dec-14, -11.5% QoQ (sold about EUR 6.4bn of Italian Govies and bought approx. EUR 4.4bn) Reduction in AFS portfolio due to strategy aimed at managing portfolio duration and optimising carry/capital gains in current low rate environment, with a positive contribution of EUR 122mln to P&L of which AFS Italian Government Bonds ** : Nominal Value EBA AFS Reserve ** ( /bn) Nominal Value ( bn) Duration (years) AFS Net Reserve ( bn) Outright ,67-0,57-0,17-0,24 0,07 in ASW in ASW ex Alexandria Total ,21 Sep-11 Mar-14 Dec-14 Mar-15 AFS Reserve related to Alexandria AFS Reserve net of Alexandria *Market Value ** Figures from operational data management system (Risk Management) page 13

14 RWAs and Capital ratios RWAs over time ( /bn) CET 1 ratio +0.2% 76,2 76,4 Dec-14 Mar-15 10,9% 10,2% 8,7% 8,1% SREP Requirement: 10.2% transitional RWAs stable (+EUR 140mln QoQ) due to offsetting effects related to the increase in credit/counterparty and market risks and the reduction in RWA s due to capital deductions below CET1 threshold Main drivers of CET1 evolution: Positive: net income generated during the period; reduction of the negative AFS reserve related to Alexandria (-EUR 239mln vs. -EUR 423mln as at Dec-14); reduction of DTA deductions and other prudential filters Negative: regulatory impacts (increase in phasing-in deductions from 20% in 2014 to 40% in 2015) and capitalization of reserves of the 2014 net losses (previously partially included in Additional Tier 1) Dec-14 Mar-15* Mar-15 transitional pro-forma* Mar-15 fully loaded proforma** * CET1 ratio calculated capitalizing 1Q15 net income; inclusion of interim net income in regulatory capital is subject to ECB specific authorization (Art. 26 Regulation EU No 575/2013), for which GMPS has already submitted an official request. **Basel 3 ratio pro-forma including EUR 3bn capital increase, the payment of NFIs 2014 coupon through the issue of new shares and the rapayment of the remaining EUR 1.1bn NFIs page 14

15 1Q15 Results 1Q15 Results - Key messages 1Q15 Results - Balance sheet 1Q15 Results - P&L page 15

16 1Q2015 P&L mln 1Q14 4Q14 1Q15 Change (QoQ %) Change (YoY %) Net Interest Income Net Fees Other revenues n.m. n.m. Total Revenues , , Operating Costs (660.5) (734.5) (653.3) Personnel costs (429.3) (430.7) (419.4) Other admin expenses (182.6) (227.5) (185.5) Pre Provision Profit n.m. Total provisions (491.7) (5,502.2) (454.2) LLPs (476.6) (5,357.0) (468.2) Non operating items * (9.0) (105.2) (29.4) n.m. Profit (Loss) before tax (202.7) (5,232.5) n.m. n.m. Taxes ,736.8 (44.3) n.m. n.m. PPA & Other items (9.8) (9.5) (13.3) Impairment on goodwil and intangible assets (687.9) n.m. n.m. Net Income at EUR 72.6mln thanks to strong Pre Provision Profit growth (+63.7% QoQ, at EUR 614mln), leading to a positive result for the period Interest margin resilience, thanks to the improvement in funding/lending spread Commission income growth notwithstanding exceptionally low rate environment Strong results from securities portfolio management and MPSCS brokerage activity Continuing focus on cost reduction LLPs impacted by 1Q15 ECB supervisory activities Net income (174.1) (4,193.2) 72.6 n.m. n.m. * Net provisions for risks and charges, Gains (losses) on investments, Restructuring costs / One-off costs, Gains (losses) on disposal of investments. page 16

17 Net Interest Income Net Interest Income ( /mln) +37.3% +0.2% Q14 2Q14 3Q14 4Q14 1Q15 Spread trend (%) Net Interest Income increased 37.3% YoY thanks to improving funding/lending spread (approx. +30 bps), as well as reimbursement in 3Q14 of EUR 3bn NFIs Quarterly evolution mainly driven by: Ongoing cost of funding reduction (+EUR 29mln) Deleverage effect (-EUR 34mln) MPS 5Y CDS evolution Average Deposit rate Average Lending rate Spread bps as at 1 Jan-15 4,0 3,0 2,0 1,0 0,0 1Q14 2Q14 3Q14 4Q14 1Q15-26bps Vs. 1Q14 +30bps Vs. 1Q14-56bps Vs. 1Q bps as at 06 May-15 page 17

18 Fees, Dividends and Trading Income Fees ( /mln) Dividends /Profit from investments ( /mln) % % Mainly AXA-MPS contribution 24 1Q14 2Q14 3Q14 4Q14 1Q15 1Q14 2Q14 3Q14 4Q14 1Q15 Trading/valuation of financial assets ( /mln) Net profit (loss) from financial assets and liabilities designated at fair value Gains (losses) on disposal/repurchase of loans, financial assets available for sale and financial liabilities Net profit (loss) from trading (incl. FVO) 45,1 28,6 147,3 41, ,2 66,8-17,3 1Q14 2Q14 3Q14 4Q14 1Q15 Net fees and commissions up 9.3% QoQ on the back of revenues from the placement of WM products (+65.5%) Positive trend from credit facilities fees (+6.5% QoQ) thanks to loans stabilization Yearly evolution driven by the increase of WM components (+5.9% YoY) offset by the reduction of the traditional banking fee component (-4.6%) Dividends, similar income and gains (losses) on investments at EUR 24mln thanks to the contribution from AXA-MPS Trading: strong results from securities portfolio management (approx. EUR 122mln) and MPSCS brokerage activity (EUR 67mln), partially offset by higher FVO of MPS bonds ( EUR 17mln) page 18

19 Operating Costs Operating Costs ( /mln) -1.1% -11.1% Q14 2Q14 3Q14 4Q14 1Q15 Personnel expenses decreased 2.6% QoQ mainly due to headcount reduction, which more than offset increased expenses associated with the National Collective Labour Agreement Other Admin Expenses down 18.4% QoQ in connection to seasonality of 4Q and to the ongoing focus on cost rationalization Personnel expenses ( /mln) Admin expenses ( /mln) Amortization and Depreciation ( /mln) -2.3% -2.6% +1.6% -18.4% -0.4% -36.6% Approx. EUR 25mln due to real estate writeoffs following the Asset Quality Review 1Q14 4Q14 1Q15 1Q14 4Q14 1Q15 1Q14 4Q14 1Q15 page 19

20 Provisions and Cost of Risk Net loan loss provisions ( /mln) Of which EUR 1.2bn related to AQR (CFR component) Q14 2Q14 3Q14 4Q14 1Q15 Cost of Risk (bps) Net of AQR driven provisions 152 Dec-12 Dec-13 Dec-14 Mar-15 (annualized) Of which EUR 4.8bn related to AQR driven provisions Of which EUR 41mln related to ECB review 139bps net of ECB review Net loan loss provisions down by around EUR 90mln vs. the previous quarter normalized and slightly below 1Q14 Cost of credit of 152bps improving from 2014 (654bps as at December 2014 including AQR driven actions) In the first months of the year the ECB conducted a review of the Residential Real Estate, Shipping, Project Finance and Institutions portfolios (approx. EUR 35bn in total), not previously included in the AQR exercise, but already cured by MPS during the 2014 year end process. MPS estimated impact of CFR of EUR 41mln booked in 1Q15 although official results not yet communicated by ECB 90% of performing exposure and almost all of the non performing exposures checked page 20

21 Business Plan update page 21

22 Restructuring Plan: main results achieved Downsizing/Derisking Total assets down EUR 50bn from Dec-11 to Dec-14 AFS sovereign bonds from EUR 22bn * as at Dec-12 to EUR 19bn * as at Dec % of the portfolio expires in 2017 Network rationalization Closure of domestic branches ahead of the Plan (from 2,915# as at Dec-11 ** to 2,186# as at Dec-14) Efficiency improvement Operating costs: reduced by EUR 750mln (-21.3%) since Dec-11 ** Over achievement of Plan targets Disposal of non-core investments Disposal of non strategic assets with a positive P&L impact. Ongoing: MPS Leasing, BMP Belgio, MP Banque; Consum.it fully incorporated Improved liquidity Full LTRO reimbursement Government Guaranteed Bonds expiring in 1Q15 L/D ratio close to medium term target Full transparency Review of accounting treatment of three structured transactions and closing of Santorini Balance Sheet restructuring Full goodwill write off; restructuring of Chianti Classico Asset Quality Increase coverage on NPE from 41% to 49% and on Doubtful loans from 55% to 65% (in period), at the best-in-class levels (avg. Italian banks doubtful loans coverage from 51% to 53% in the same period) Capital Completion of EUR 5bn capital increase in 2014 and reimbursement of EUR 3bn State Aid Additional EUR 3bn fully underwritten Planned reimbursement of remaining NFIs MPS: a lean and fully restructured bank ready to deliver results and capture market opportunities *Nominal Value **Including Biverbanca page 22

23 Rationale for the updated Business Plan targets Supervisory Review Evaluation Process (SREP) completed: 10.2% CET1 transitional threshold set as minimum SREP target Asset Quality Review: review of the entire credit portfolio with impacts fully reflected in 2014 results; introduction of new criteria for classification and evaluation (detection and coverage) of credit exposures Full repayment of New Financial Instruments (NFIs) Evolution of the macroeconomic scenario, with record low interest rates and slower recovery than originally expected New macro assumptions GDP * (YoY %) 3M Euribor annual average * (%) BTP BUND Spread * (%) New assumption Restructuring Plan New assumption Restructuring Plan New assumption Restructuring Plan 1,56% 0,70% 1,40% 1,50% 1,04% 2,51% 1,20% 1,96% 1,96% 0,60% 1,64% 0,50% 1,40% 1,40% 1,40% 0,30% 0,70% 0,23% 0,21% 0,02% 0,13% 1,35% 0,80% 0,80% 0,85% 0,90% -0,40% E 2016E 2017E 2018E E 2016E 2017E 2018E E 2016E 2017E 2018E Source: Processing BMPS Research on market data of the leading research centers and the DPEF; Restructuring Plan page 23

24 Key targets 2018 Growth (CAGR 14-18) Efficiency Risk Revenues (%) +4.8 Net fees and commission (%) +7.3 Operating expenses (%) -2.2 Pre Provision Profit (%) +15 Cost / income (%) ~ 49 Cost of credit (bps) guidelines: PPP: EUR bn Net result positive Balance sheet structure Loans / deposits * (%) ~ 94 CET1 (fully loaded) (%) ~ 12 Profitability RoTE ** (%) ~ 8 ROE *** (%) ~ 8 Net income ( /mln) ~ 880 *Loans to customers, excluding debt securities /Direct funding excluding NFIs ** Net income for the current year / Average Net equity of the previous year and the current year excluding dividend accrued in the year ***Net income for the current year / Average Net equity of the previous year and the current year excluding dividend accrued in the year and net of goodwill page 24

25 Main drivers of the updated guidance 1 Further increase in commercial productivity Structural review of distribution and business model Dedicated service model for high potential growth companies 2 Improvement of asset quality Lending management and credit policies process review completed Strong transformation of management of problem loans, through the enhancement of dedicated organizational structures and review processes Ongoing liquidity and financial strength Downsizing of ECB to a level consistent with T-LTRO facility in line with other banks (completed the repayment of LTRO) Capital increase of EUR 3.0bn, with early repayment of the remaining EUR 1.1bn of New Financial Instruments page 25

26 1 Continued structural optimization of distribution and business model Optimisation of local footprint Closure of further 350 branches by 2018 ~1,800 branches in 2018 ~700 branches restyled 200 branches relocated Expected ~EUR 23mln run rate cost savings per year from branch closures EUR 35mln of one-off costs related to branch closures EUR 140mln of investments ( ) Hub & Spoke Branches A new distribution model transforming the existing branches in a modular network: o o o Hub branches: branches of medium-large size, with high commercial relevance, staffed with account managers for Small Business, Premium and Value Customers; hub for the management and development of the Small Business portfolio Spoke branches: smaller branch offices with commercial focus on Premium and Value Customers Independent branches to cover big cities and high potential areas Better focus on small business customers Multichannel Integration Digitization of end-to-end processes Migration of transactions to online channels Improvement of online channels Enhancement of self banking in branches The new online bank as catalyst in the new multichannel approach Simplifying and innovating offer Simplification of the product portfolio Innovating in the offering packages Optimization in the pricing approach page 26

27 Other initiatives Levels Goals 1 Dedicated service model for high potential growth companies Seize opportunities linked to increased customer demand and business competitiveness Improve the profitability through the establishment of a dedicated commercial team to maximize cross-selling Dedicated network Organization Dedicated branches focusing on more selected group of client to improve service quality Highly qualified relationship managers Dedicated coordinators for each area Local autonomy for pricing and credit authorization to reduce customer response time Product Offering Offering based on high value added and specialized product and services Team approach to enhance the network of specialists and sophistication of products Hedge of financial risk International Transaction banking Capital Market and Advisory page 27

28 1 Key performance indicators Lending & Total Funding Volumes/ Total FTE /mln +23% 12,9 15,9 Increase in client facing FTEs Operating Costs/ Lending & Total Funding Volumes / % E Cost/Income (%) E Reduction achieved in a low growth environment -16pp 65,1% 49,4% Retail Fees/ Retail Lending & Total Funding Volumes % 0,77 +13bps 0, E Pricing optimization and increase in productivity thanks to new distribution model E Corporate Fees/ Corporate Lending & Total Funding Volumes % 0,43 +16bps 0, E Closing market share gap page 28

29 2 Actions taken to enhance the management of problem loans: dedicated unit The need to deal with a potentially problematic situation before the loan actually becomes Unlikely to pay has resulted in a reorganization of the Debt Collection Area DEBT COLLECTION UNIT Reinforcement in terms of collection management and instruments DISTRESSED CREDIT RISK AND DEBT COLLECTION UNIT Advantages: Reduced intervention timing (including through voluntary asset disposals and debt reconfiguration/repayment support activities) Management by regional areas as well, resulting in greater vicinity and visibility/awareness of situations at risk Flow shared, in terms of information quantity and quality, between the two Areas, with evident benefits in terms of knowledge and analysis of the portfolio Synergies of resources and analytical/management instruments Sharing of the main management and collection strategies page 29

30 2 Actions taken to enhance the management of problem loans Focus on higher value positions Outsourcing the management of small-ticket positions o Completed outsourcing of 100,000 NPEs, representing approximately 80% of the total positions o o Selected segments and substandard loans outsourced Partnerships with best-in-class outsourcers # of impaired ticket per FTE ~350 ~100 Preoutsourcing Postoutsourcing Structured program of portfolios disposals Multiannual program to dispose of portfolios, of which ~EUR 5.5bn to be realized between 2015 and 2018 o EUR 2bn disposals planned in 2015 o EUR 3.5bn disposals in Nominal value of disposal portfolios ( /bn) ~1 ~2 ~ REOCO To limit the reduction in value of mortgaged real estate pledged as guarantee, following the continuous decrease in adjudication value during forced sales, the use of REOCOs (Real Estate Operative Company) will need to be intensified, also involving a review of the associated organisation and activities Given its nature as a defensive instrument, the objective of the REOCO is not to be awarded the collateral, but, through participation in the auction, to favour the competitive bidding process, reducing the desertion rate and maximising the expected sale price REOCO to reach full operational capacity in the first half 2015 page 30

31 2 Key performance indicators Cost of risk bps 654 Driven by new regulatory framework and models Decay Rate * % 4,7-3.2 pp Driven by the recovery in macro-economic conditions and cure rate initiatives 1,5 106 Impaired Loans (NPE)/Total Lending % E bps 26 High leverage thanks to recovery in economy Structural measures under discussion by the government could have material positive impact on recoveries E Impaired Loans (NPE) Coverage % bps 55 Mantains best-in-class coverage (avg. peers in 2014: 39.8%) E E *New doubtful loans inflows in the period/performing loans at the beginning of the period page 31

32 Net interest income Net Interest Income evolution ( /mln) +18% Sensitivity to interest rates of EUR 300mln * for a parallel shift of rate for 100bps 2014 NFIs Volume Cost of Rate 2018 reimbursement effect funding effect effect 2014 NII/Total assets: 118bps 2018 NII/Total assets: 144bps *With the ECB cost of funding not correlated with the movement in market rates page 32

33 Net fees and commissions Net fees and commissions evolution ( /mln) +33% Closed the gap vs peers: Fees/Lending and Total Funding Volumes at 0.60% (from 0.48% in 2014) in line with the market Products Credit Services 2018 (WM, Bancassurance and Other financial products) (Credit facilities and Other credit services) (Trade Finance, Payment services, Client expense recovery and Other) Wealth Management growth driven by the new distribution model and increasing market share Bancassurance increase driven by product remix (focus on P&C inflow +30% Cagr 14-18) Corporate fees growth driven by the new service model, new products and services and the optimization of pricing Increase in payment services from growth of the market page 33

34 Operating Costs Operating costs evolution ( /mln) -9% 2014 GMPS «Operating costs/total assets» at 1.5% vs 1.8% avg. Italian banks EUR 34mln vs. normalized Staff Cost Other Admin Amortization 2018 Expenses Staff costs: further reductions planned relying on existing laws and national agreement regulating the sector Additional savings are expected from review and rationalization of organizational model and processes Amortization: planned ~EUR 660mln of investment (IT and Real estate) in the period Over delivering vs. Restructuring plan with additional measures introduced to achieve new target for 2018 page 34

35 Breakdown of the Pre Provision Profit growth Pre Provision Profit evolution ( /mln) +75% Operating NII Fees Other 2018 costs contribution contribution reduction page 35

36 Capital Common Equity Tier 1 evolution (Transitional; /mln) 2018 CET1 Fully loaded 12.0% +285pbs +220pbs -45pbs +35pbs -50pbs -115pbs 12.0% 8.7% 2014 Capital Capital IRB shortfall AFS Reserve Credit RWA Phase in and 2018 increase, NFI Generation to expected on Alexandria other effects reimburseme Losses nt, MEF coupon CET1 ratio transitional above SREP threshold (10.2%) at all times DTAs that do not rely on future profitability (Weighted at 100% in RWAs) are expected to reduce over the period because of their partial conversion into tax credits (~43% of 2014 transformable DTAs already in June 2015) Negative AFS reserve related to Alexandria transaction always fully deducted from CET1, according to ECB requirement RWAs projection includes the effects of recalibrated IRB models and credit portfolio evolution page 36

37 Final remarks page 37

38 Final remarks Return to profitability thanks to operational performance and normalization of cost of credit Strong capital base with additional EUR 3bn right issue and no reliance on State Aid Strong commitment to reduce the high level of NPEs as a driver to achieve higher levels of profitability Open to M&A value-enhancing opportunities to accelerate the achievement of higher returns page 38

39 Disclaimers This document has been prepared by Banca Monte dei Paschi di Siena S.p.A. (the Company and together with its consolidated subsidiaries, the Group ) solely for information purposes to present the Group s strategies and financials. The information contained herein has not been independently verified and provides a summary of the Group s financial statements and is not complete; complete interim consolidated financial statements will be available on the Company s website at This document and the information contained herein does not contain or constitute an offer of securities for sale, or solicitation of an offer to purchase securities. Neither this document nor any part of it nor the fact of its distribution may form the basis of, or be relied on in connection with, any contract or investment decision in relation thereto. Any securities referred to herein have not been registered and will not be registered in the United States under the U.S. Securities Act of 1933, as amended (the Securities Act ). No securities may be offered or sold in the United States unless such securities are registered under the Securities Act, or an exemption from the registration requirements of the Securities Act is available. The Company does not intend to register or conduct any public offer of securities in the United States. The information herein may not be reproduced or published in whole or in part, for any purpose, or distributed to any other party. By accepting this document you agree to be bound by the foregoing limitations. This document may include certain forward looking statements, projections, objectives and estimates reflecting the current views of the management of the Company with respect to future events. Forward looking statements, projections, objectives, estimates and forecasts are generally identifiable by the use of the words may, will, should, plan, expect, anticipate, estimate, believe, intend, project, goal or target or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements include, but are not limited to, all statements other than statements of historical facts, including, without limitation, those regarding the Group s future financial position and results of operations, strategy, plans, objectives, goals and targets and future developments in the markets where the Group participates or is seeking to participate. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements as a prediction of actual results. The Group s ability to achieve its projected objectives or results is dependent on many factors which are outside Group s control. Actual results may differ materially from those projected or implied in the forward-looking statements. Such forward-looking information involves risks and uncertainties that could significantly affect expected results and is based on certain key assumptions. Moreover, such forward-looking information contained herein has been prepared on the basis of a number of assumptions which may prove to be incorrect and, accordingly, actual results may vary. All forward-looking statements included herein are based on information available to the Company as of the date hereof. The Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by applicable law. Pursuant to para. 2, article 154-bis of the Consolidated Law on Finance, the Financial Reporting Officer, Mr. Arturo Betunio, declares that the accounting information contained in this document corresponds to the underlying documentary evidence and accounting records. page 39